How Escrow Works

When you’re closing on your new house, an escrow holder is used to assure the process will close appropriately and in a certain amount of time. When payment is held by a third party in a transaction between a buyer and a seller, it’s in escrow. An easy way to understand the concept of what an escrow company does is to think of the use of PayPal for online purchases.

The escrow holder makes sure that the terms and conditions of the agreement between the sellers and the buyers are performed in preparation of the sale being completed.

Escrow companies collect the following legal documents:

Terms of sale and any seller-assisted financing

Requests for payment for various services to be paid out of escrow funds

Loan documents

Tax statements

Fire and other insurance policies

Title insurance policies

Upon completion of all portions of the escrow, closing can take place. All outstanding payments and fees are taken and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). Title to the home is then transferred to you as new homeowner and correct title insurance is issued as noted in the escrow policy.

The escrow agent gets a payment at the completion of closing. I’ll keep you informed on the next steps.

The Escrow Holder Will:

Assemble escrow guidelines

Request title research

Meet lender’s guidelines as specified in the escrow agreement

Receive payments from the buyer

Prorate insurance, tax, interest and other payments according to guidelines

Record deeds and other paperwork as instructed

Obtain title insurance policy

Close escrow when all terms of agreement of seller and buyer have been finished

Disburse funds and finish instructions

The Escrow Holder Won’t:

Assemble escrow guidelines

Request title research

Meet lender’s guidelines as specified in the escrow agreement

Receive payments from the buyer

Prorate insurance, tax, interest and other payments according to guidelines

Record deeds and other paperwork as instructed

Obtain title insurance policy

Close escrow when all terms of agreement of seller and buyer have been finished

Disburse funds and finish instructions

Tell you what’s best – the escrow holder must maintain a neutral, third-party status

Give insight about tax implications

Mortgage Escrow Account

Often, to pay recurring costs while there’s a loan on the house, a Mortgage Escrow Account is created. Generally, the Escrow Account is partially funded at closing and the home buyer makes on-going contributions through their monthly mortgage payment.

Now you know more about how to close on your future home. And, you can be a more confident home buyer and future homeowner.

As your Buyer's Agent, I can help you find the perfect house for you, and as your Listing Agent, I'll get top dollar for your property. Call me, Irvine's real estate expert, at (714) 856-7003. I can help you make the decision that gets the outcome you want.